John Nadworny is familiar with scary math. His youngest son, James, recently turned 22, the point at which school districts relinquish responsibility for a special-needs child.
James has Down syndrome; Nadworny's family has spent two decades preparing for this day. They bought an apartment building near their home, west of Boston. James and two other disabled adults will live with their caregivers. Rents will generate $65,000 a year for the family. That's not enough: James requires round-the-clock care, daily "programming" to keep him engaged and intellectually fulfilled, and, not least, transportation to and from those various activities.
Nadworny's experience is helpful, and not just because of James. Nadworny runs a financial-planning practice and is the author, along with a business partner, Cynthia Haddad, of The Special Needs Planning Guide. He says our acute distress makes us like a lot of other families with a disabled child.
The number of children diagnosed with autism has skyrocketed in recent years, from fewer than 1 in 1,000 in the 1980s to 1 in 50 kids today.
Well before Finn hits 22, a wave of disabled children will "age out," requiring massive amounts of state assistance. So just as baby boomers start putting unprecedented stress on government benefits, a slightly smaller but still significant population of disabled people will be in need of government help too.
"People assume the state will be there to help with their child," Nadworny says, "but that's a really risky bet."
After an initial meet and greet, Nadworny asks us to submit our tax returns, bank statements, and the data on our mortgage and car loans. We provide the necessary paperwork, then file into his office a few weeks later. Nadworny looks nervous. "Frankly, the numbers we have could easily overwhelm you," he says. Alysia and I look at each other warily. There is, we learn, good news and bad news. Looking at our balance sheet, we see that our assets come to a healthy $930,000, which means while we're not one-percenters, we're firmly ensconced in the upper middle class.
Most of our wealth is tied up in our house; the rest is socked away in an ill-considered mix of stocks, fixed-income securities, and other investments. We have no rainy-day fund of liquid assets. Because my book and speech income are so variable, over the past five years, we've made anywhere from $80,000 to $270,000, averaging $160,000 or so. Our expenses are high as well, hitting $165,000 in 2011 and $185,000 last year. In the years we run a deficit we tap savings to make up the shortfall.
We hired a bookkeeper last fall to detail our spending and make some sense of the deficit. She found that $30,000 a year went to mortgage payments, $4,400 to utilities, and $9,200 to taxes in 2011. Another $50,000 consisted of reasonable, discretionary expenditures, much of it one-time costs to furnish our new home. The remaining $24,000 is what Alysia and I call a "stupidity tax." We paid nearly $1,000 in credit card fees and interest payments and an additional $2,300 to sustain my Nicorette habit.
As journalists, we might justify the $2,000 we spent on books and movies as necessary brain food, but as special-needs parents, those expenditures start looking a little more frivolous. So do the $5,300 we spent on clothes in 2011 and the whopping $6,000 we handed over to various restaurants and cafés. Finally, there's the $6,000 in cash withdrawals.
How much of our money goes to Finn in one form or another? Certainly the $24,000 we spend on our babysitter cum favorite aunt, Gee. If not for Finn's disability, we could easily manage two children without additional help. Then there's the $9,000 in out-of-pocket health care costs, $5,400 of which goes toward deductibles for procedures for Finn.
The first step in getting our finances on track, Nadworny tells us, is to control our spending. Then we need to put together a proper savings plan that isn't locked away in home equity. "You have to live in your house," Nadworny notes. "So it's not generally considered a measure of wealth." We know that at some point in the future we'll be able to sell it, probably for a decent profit, but it doesn't help things much now.
And while our $380,000 in savings is decent for our age and income, only 15% is invested in tax-deferred vehicles. Not great, maybe, and something we can surely fix, but it's where we are at the moment. We have an additional $16,000 in college savings, and in the course of working on this story, we discover $16,000 in a New York State pension fund for Alysia. But all that is chicken scratch against what we'll need to sustain Finn when he "ages out" of the system.
In the meantime, I'm worried we're inadequately prepared for any kind of disaster. While Northeastern University provides our family ample health insurance, its $160,000 life insurance policy is a drop in the bucket of what Alysia would need were I to die prematurely. We don't have any life insurance for Alysia. We haven't written a will or designated a guardian for the kids. We are, Nadworny implies, an urgent case.
It isn't as if our long-term goals are lavish: We'd like to retire at 70. We want Annabel to go to any college she chooses. And we want Finn, of course, to have a happy, healthy, richly engaging life.
The bill for achieving those goals? We need to save $800 a month for Annabel's college alone. We should be contributing the allowable maximum of $17,500 a year to my employer-provided retirement account.
And Finn? "The fact is, you'll have to rely on government benefits," says Nadworny, who has already warned us that gaining access to those benefits is incredibly time-consuming. Disabled adults are eligible for Supplemental Security Income as long as their total assets don't exceed $2,000. Even the measly $4,500 we put into a 529 -- a tax-deferred investment vehicle for college savings -- must be transferred out of Finn's name.
All this creates a host of planning issues for special-needs families, since they cannot designate their disabled child as a beneficiary in any will or life insurance policy without jeopardizing his or her eligibility. There are, instead, special-needs trusts that specifically address this concern, but that's still uncharted territory for us.
The bottom line? Unless we receive some windfall, our combined savings and the SSI benefit won't come close to covering the $100,000 a year, in 2012 dollars, it could well take to care for Finn, who will need 24-hour attention, continuous learning, and a way to get to and from wherever he needs to go.
We've reached the point where our house, basically, is Finn's trust fund, meaning we'll be able to apply the proceeds from the sale of that to his care. That, of course, assumes that we won't still need a big house to take care of him as an adult and that we can make enough money by downscaling to make a dent.
"The problem you have, really, is Gee," Nadworny says. He looks stricken as he says it.
"Think of it this way," Nadworny says. "You're paying your nanny $2,000 a month. "That's $2,000 you are not saving. That's equivalent to a" -- Nadworny's fingers fly across his calculator -- "$365,000 mortgage. On top of your $417,000 mortgage."
The metaphor isn't perfectly fair, of course. We pay neither property insurance nor upkeep on our beloved sitter. Nadworny's point hits home nonetheless, and with a brutal calculus that's impossible to avoid.
To the extent we have anything approaching a normal life, Gee makes it happen, a life in which both partners pursue their dreams, attend social events with our friends, and our daughter receives the sort of two-on-one attention that would be her lot if we hadn't had Finn. But a normal life, by Nadworny's accounting, might be a luxury we can't afford.
Paying for Finn (cont.)
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